Iran, the JCPOA, and the 'Big Boss'

The struggle between supporters of the Joint Comprehensive Plan of Action (JCPOA) and its critics is deeply embedded in the political system of Iran and currently plays a central role in the internal disputes within the Islamic Republic regarding the country's domestic and international policies. Critics of the JCPOA, which was signed in July 2015 and entered into force in late January of the same year, accuse Hassan Rouhani's government of having reached an agreement that resulted only in a 'paper lifting' of foreign economic sanctions against Iran in exchange for significant concessions to the group known as the 'P5+1', while in practice, no substantial changes have occurred in favor of Iran. These critics, who belong to the most conservative factions of the Islamic Republic, particularly emphasize the ongoing difficulties that weigh on banking and financial relations between the Islamic Republic and the outside world. Iran remains deprived of access to a significant portion of its frozen assets abroad, European and Asian banks refrain from financing transactions with Iran out of fear of U.S. repercussions, and Iranian economic actors continue to face various obstacles in their dealings with the world. Furthermore, the immense difficulties Iran faces in conducting dollar transactions, from the critics' perspective, have left the country paralyzed in accessing the international banking system. Only the naive believed that the signing of the July 2015 agreement in Vienna between Iran and the 'P5+1' would magically dissolve the intertwined sanctions stemming from international resolutions and the laws of the U.S., the European Union, and other industrial powers (Japan, Australia, Canada, etc.) overnight. Critics of the JCPOA, in their usual populist manner, lead their audience toward unrealistic conclusions based on a series of real issues. These naive individuals forget that beyond the 'nuclear sanctions', which the JCPOA gradually aims to lift, there exist 'non-nuclear sanctions' imposed by Washington against Iran following the U.S. embassy takeover in Tehran and later related to 'terrorism' and 'human rights', which have no connection to the agreement reached in Vienna. It is through this naivety that anti-Rouhani populists today beat the drum of opposition to the JCPOA, describing it as 'much ado about nothing'. Nevertheless, the leadership apparatus of the Islamic Republic (without whose green light the Vienna agreement would never have been signed) and a large segment of the populist critics of the JCPOA are well aware that Iran had reached the brink and could no longer insist on its previous options unless it wanted to emulate North Korea and its closed economic system. A country that handed over its control not for eight days, eight weeks, or eight months, but for a full eight years to a president like Mahmoud Ahmadinejad could not avoid being engulfed in the terrifying abyss of the toughest economic sanctions since World War II. With the signing of the JCPOA, the necessary legal and political grounds for the gradual lifting of the chains of sanctions from the Iranian economy were established, the international atmosphere surrounding the country changed, a large number of foreign political and economic delegations headed to Tehran, Iranian banks were once again linked to the international banking system through their return to the financial messaging system known as 'SWIFT', and some of Iran's frozen foreign currency assets returned to the country. The achievements of the JCPOA are certainly much greater, but among the most important, one must undoubtedly emphasize the increase in Iran's capacity for oil production and exports, while if the sanctions had continued, and especially if, as feared, they had intensified, the country's oil sales could have likely dropped to zero. However, the significant difficulties that exist despite the JCPOA in normalizing Iran's position in international economic relations cannot be overlooked. A significant portion of these difficulties stems from the will of powerful factions within the Islamic Republic that fundamentally oppose the process of the country's 'normalization' and see their survival in its 'remaining exceptional'. Another part arises from the differences between nuclear and non-nuclear sanctions, the incompatibility of Iran's financial system with the international financial system, and the closure of the pathway for Iran to utilize the U.S. financial system. A significant portion of these difficulties stems from the will of powerful factions within the Islamic Republic that fundamentally oppose the process of the country's 'normalization' and see their survival in its 'remaining exceptional'. In a report by the Iranian Foreign Ministry to the Parliament regarding the JCPOA, published on April 18, it is stated that according to this agreement, 'only the economic and financial sanctions related to nuclear issues have been lifted, while sanctions related to other pretexts, including the missile program, terrorism, and human rights, and generally the primary U.S. sanctions remain in place.' The same report adds: 'It is now evident that one of the challenges in lifting sanctions is the overlap of lifted and non-lifted sanctions, particularly the impact of primary U.S. sanctions on other sanctions.' The sanctions described as 'primary' were imposed against Iran following the U.S. embassy takeover in Tehran and gradually encompassed various areas of trade and investment until the mid-1990s. These sanctions only apply to American individuals or companies, prohibiting them from any transactions with or investments in Iran. American banks are also subject to this prohibition and cannot provide financial services to Iranian individuals, businesses, and institutions. Secondary sanctions have an 'extraterritorial' aspect and target non-American individuals and companies, including the D'Amato-Kennedy Act of 1996, which subjected any investment by non-American individuals and companies in Iran (and also Libya) to U.S. penalties. Given the enormous volume of sanctions and their interconnections, it is sometimes unclear which of them have been lifted following the signing of the JCPOA and which remain in force. In response to this complexity, all reputable European banks refrain from financing transactions conducted with Iran or generally from entering the Iranian market. They have not forgotten that in 2014, the French bank BNP was fined nine billion dollars by American lawmakers for conducting dollar transactions with Iran, Sudan, and Cuba. In this context, European banks prefer to wait until the very complex American laws and the ambiguities regarding nuclear and non-nuclear sanctions, as well as primary and secondary sanctions, are clarified. These complexities, due to the inability to utilize the U.S. financial system, weigh heavily on all of Iran's dollar transactions. Given all these complexities and the significant difficulties that persist even after the signing of the JCPOA in the realm of Iran's international economic relations, is the ultimate solution not for Tehran to engage in direct dialogue with Washington? In May 2013, during the electoral campaign, Hassan Rouhani raised this issue among students at Sharif University of Technology. He said: 'I believe negotiating with the U.S. is easier than negotiating with Europe, because Europeans are looking for 'permission'... The U.S. is the 'big boss'. It is easier to strike a deal with the big boss.' In the global economic arena, the United States, unlike the first few decades after World War II, is no longer an absolute power. Other powers have emerged in the world, from the European Union and Japan to emerging powers like China that challenge Washington's hegemony. Nevertheless, in various fields, the U.S. still leads, particularly in monetary matters. The U.S. dollar certainly faces strong competitors, especially the euro, and the Chinese yuan will soon rise against it. However, in the meantime, the dollar remains the world's dominant currency, holding sixty percent of the world's central bank reserves. In the oil sector, which is Iran's most important export commodity, transactions are primarily conducted in dollars. The 'big boss' that Hassan Rouhani referred to before taking office as president is understood in this sense. Without direct dialogue with the United States and resolving issues between the two countries, Iran's economy will not be able to become a normal member of the international economic community. The Chinese, Vietnamese, and Cubans understood this reality sooner. Iran will eventually come to this realization, but only after incurring enormous costs that are unjustifiable by any logic.